Thursday, September 26, 2013

Is It Really Better to Buy Ore than to Go Mining?

     "Only Noobs mine ore." We've all heard it a million times in various forms. The more experienced and less snobbish goldmakers will tell you that it's just more profitable to do just about any other gold making action in-game. Personally, I've had at least one gathering toon for years and enjoy it immensely. For me, it's relaxing to just fly around mining while listening to Alanis Mori... I mean Snoop Dogg. Unfortunately, many new Jewelcrafters or Blacksmiths who choose mining as a secondary profession will still occasionally be hazed on goldmaking forums, since "it's OBVIOUSLY much more profitable to buy ore off the AH." While there's been a lot of talk from different screen names I haven't seen anyone do a breakdown of whether or not the above statement is actually true or not, and I like testing game-changers analytically, so let's do that now (note: general consensus is usually correct, but I learn a lot with my testing). This is hopefully going to be a little more mathy that most of my posts, so for anyone who doesn't want to read all the mumbo jumbo, just scroll down to the conclusion at the bottom for a nice, easy wrap up. Ok, so, once and for all, is it really cheaper to buy ghost iron ore or bars off the Auction House, or should you mine them yourself?

 "He sure has the reach advantage, and she has...What the?!...Is that a rack of blunderbusses and greatswords?!"

     While a bunch of people say that it's always more profitable to buy ore off the AH, I'm gonna have to go with a hypothesis of, "It depends." The times that I would rather be lazy and buy ore are the moments when I don't have very many gems to cut; the miscellaneous flight time seems more weighted when you're only farming 5 or 6 stacks of ore versus the massive 200-stack grind sessions. So, I naturally feel that it's better to farm ore for bigger stacks than smaller stacks. But enough guess work. On to math!

     First off, we'll start with the basic profit equation of Profit=Revenue-Expense. In this case, our revenues are the gold earned from selling gems or armor. The expenses are going to have to be monetary, but the big problem with mining, or the blessing, depending on how things turn out, is that it is pure profit from trading in time and prospecting ore. So, we'll turn the time spent mining and prospecting on both sides into an expense. Jewelcrafting should be more fun to play with than Blacksmithing, so let's focus on that profession, ok? The process for buying will be 1) purchasing ore for gold, 2) spending time prospecting which we will convert into potential gold lost, and then 3) selling cut gems. The process for mining will be 1) mining ore (Duh), 2) spending time prospecting, 3)and then selling the gems. Alrighty, here we go duhn du-duh-duhhnnnn: when is it more profitable to buy ore?

Profit(Buy) > Profit(Mine)
Revenue-Expense(Buy) > Revenue-Expense(Mine)
GemSales-[(#Stacks)(Price/Stack)+(#Stacks)(ProspectTime/Stack)] > Gemsales-[(#Stacks)(MiningTime/Stack)+(#Stacks)(ProspectTime/Stack)]

     Gem Sales (the only revenue) are the same on both sides, so that cancels out. The awkwardly named MiningTime and ProspectTime are in terms of "gold/stack." We can put in variables to make all this shorter and easier to read as well. Also, the inequality flips when we subtract out Gemsales and divide by the -1, my least favorite algebra trick that I always forget to do.

GemSales-[(#Stacks)(Price/Stack)+(#Stacks)(ProspectTime/Stack)] > Gemsales-[(#Stacks)(MiningTime/Stack)+(#Stacks)(ProspectTime/Stack)]
X: #Stacks,  Y: Price/Stack, Tp: ProspectTime/Stack, Tm: MiningTime/Stack
XY+XTp < X(Tm+Tp)
X(Y+Tp) < X(Tm-Tp)
Y+Tp < Tm-Tp
Y < Tm
Ore Price < MiningTime/Stack

     So there ya go, we have a surprisingly simple and obvious answer after almost everything cancels out. in short, it's cheaper to buy ore if your time is more valuable than time it would take you to farm. That's not 100% the right interpretation though, as we'll go over quickly in the conclusion. Also, I'm ignoring small miscellaneous time costs like buying from the AH, mailing between characters, and flying to the Valley of the Four Winds, since most of those can be reduced to almost nothing with addons like TradeSkillMaster. Basically, this should answer a bunch of the questions you might have been having about the process.

Either way, when you mine, lookout for that one stupid tiger that always freakin aggros.

     It is only more profitable to mine when ore is more expensive than other alternatives. It essentially comes down to the age old question of "is mining a good profession." Assuming, you know what you're doing and can farm up 40 stacks every hour, at current US prices of 3.49 g/ore that comes out to about 69g per stack or 2,800g per hour. There are many other farming options and dungeon runs that can net 4k+ per hour, but the question is, are you going to do them? Mining remains a fantastic option for trading time for profit. 
      To give an example of this all, one hour of mining would yield 40 stacks of hour, giving you about 7 of each rare gem and 40 of each uncommon after prospecting (for values, hover over the number in the % column on any prospecting tab of WoWhead). Prospecting takes about 13 seconds to work through a stack of ore (2 second cast w/avg 1.25 seconds of looting), so at least 8 minutes just doing that in this example.

Profit(Buy) > Profit(Mine)
Revenue-Expense(Buy) > Revenue-Expense(Mine)
11,400g - [(40stacks)(69g/stack) > 11,400 - (4k+)
11,400g - 2,760g > 11,400 - (4k+)
8,640g > 7,400g
[Buying ore is 1,240g/hr more profitable than mining.]

     The trick to all this though is that if you DON'T go run dungeons, or if you just buy up ore on the AH, prospect it, and log off, when you would have been willing to go and mine it, you're losing that potential profit, and mining would have been the way to go. Here's why. That opportunity cost varies according to what you would have done in that specific hour. In other words, if you would have sat around in /G talking about how overpowered holy pallies are, then you're making zero gold and MiningExpense/OpportunityCost/last-part-of-the-formula, changes considerably.

"Logging off after Buying n' Prospecting" Scenario
Revenue-Expense(Buy) < Revenue-Expense(Mine)
11,400g - 2,760g < 11,400g - 0g
8,640g < 11,400g
[Mining is 2,760g/hr more profitable than AHing.]

     So, as you can see, either course of action can be more profitable depending on the mining expense - whether or not you make gold in ways other than Jewelcrafting. My concluding thought of all of this is that it's only better to buy ore if you, in the same session (or some scheduled time), go out and make up the debt you've accrued by purchasing that ore rather than farming it, because you've cost yourself 3k in potential profit if you do nothing. Don't be that guy. On the other hand, if you're super busy, raid's about to start, you have four other professions to manage, and you just don't have that much time to spare, then don't worry about it, you're still making 8,000 gold for 8 minutes of prospecting, a little bit of gem cutting, and a quick cntl+scroll on TSM 2.0. So, grats!

     Thanks for reading my little WoW blog here! Subscribe to my Twitter for future updates, and until next time, remember that there's no secret to making gold in the World of Warcraft, all you have to do is just

Search. Craft. Post.
Ever Day.

     P.S. For anyone calculus inclined, I apologize, I was hoping the math would get exciting, too, but it all just cancelled out all nice and purdy. If you really want to play with derivatives or whatever, find the minimum hourly profitability of a dungeon run to make buying ore better. Honestly though, the answer is right there on the other side of the equation. Whamp whamp. I'll find something more fun next time.


  1. Your initial equation assumes that buying is greater than mining (Profit(buy)>Profit(mine)). This assumption creates a fallacy in your math. To check it, redo the same math using Profit(buy)<Profit(mine).

    1. Of course. The point isn't which way the < goes, it's finding some sort of equivalency between the different variables. But good point! If we hadn't identified ahead of time that we were looking for when it is more profitable to buy ore (the sentence above the first equation "when is it more profitable to buy ore?" establishes the inequality) then we could use something else, but this is specifically what we want to find.

      We could redo the equation with Profit(buy)<Profit(mine), but that would just be looking for what underlying variables give you a situation where it is more profitable to mine ore. We just happen to choose the opposite situation, because we felt like it. Assumptions, not fallacies.

  2. hi,
    it depends on how you feel, I don't mind going around and doing some mining. on my server it cost more to buy ghost iron bars to make say living steel than it is to mine your own ore.on the same note the same ore is just alittle cheaper than mining your self because any of the ore comes on the A.H. cheap it is bought up quickly. just to verify I my character is not high enough level yet to mine this ore so I have to buy it..

    1. Absolutely! One thing I. Was hoping to show was that the people who say it's always better to buy are imposing their personal preferences on others; as you said, it depends.

      On the living steel comment, it takes 120 ore to transmute, or an average of 86 with the bountiful bags perk. 86 GIO should take 6-7 minutes to mine up, so feel free to play around with those numbers. Essentially though, it's the exact same equation, but with LS revenue and transmute time. Everything still cancels out though,

  3. "Time is money friend"

    However, there is one time where mining is better, which is, doing it on any character not max level.
    The XP bonus overplays any AH cost benefit. There are very few ways to get XP from the AH and still turn a profit.

  4. And, you can take it to the extreme and join the pacifist group: only leveling with mining, herbalism, and archaeology and getting to 90 with Zero kills.

  5. I agree with most of what you have written in your post. Mining/Herbing (you do use a druid, right?) can be very relaxing. expecially with some good tunes (Like Final Fantasy VII sound track... er, Snoop Dogg). As to which way is cheaper mining or buying off the AH... is not really the question to ask, though you're absolutely right that it depends on how valuable your time is.

    What you should ask is "Which is more profitable?" Which I think will always include buying stacks off the AH.

    Why? Because the more stacks we process the more money we make. If we limit ourselves to just what we can mine we limit how much money we make. At the very least, if you have the time, you can buy AND mine. Though if you're buying a lot you'll spend a lot of time processing it, posting it, etc, and maybe not have enough time left to mine.

    Which a;together may not be quite as fun as mining yourself!

    1. I was initially confused by your comment, since the question "which is more profitable" was the question asked in the math (not the title though, Google optimization be damned!), but since you pretty clearly read everything, I think I know what you're talking about. You're not talking about profitability per stack or profitability per hour, but total profit attainable, in which case, I see your argument. If I understand you correctly, you're saying that AH will always be more profitable because you can actually go out and buy 500 stacks of ore and prospect/cut/sell them, whereas it would take an absurd amount of time to mine those 500 stacks.

      Here's where you and many other people are making their logical flaws though:
      "The more stacks we process the more money we make."
      Time spent processing, cutting, mailing and doing any form of processing other than, actually posting adds value to the product but does not add revenue. It's like if someone with 100,000g spent everything they had on a severely underpriced Swift Spectral Tiger; they wouldn't say they have 600,000g, because they're broke. On the other hand, they could say that they have 600,000g in wealth. But, yah, that's the mistake that many people make in the ore debate: value vs. cash.

      Wrapping all that up to the point of the post though, yes, you have a faster income by processing more stacks when you buy from the AH, but because you spent a large chunk of gold buying all the ore, you're starting with -$XX,XXX. With mining, you're income is slower, but you aren't spending anything to start, so you're beginning at $0. When you say that "the more stacks we process the more money we make" you're forgetting to mention that you have to pay "-$XX,XXX" in order to avoid mining (24 hrs. a day is 1000 stacks, no one prospects 1000 stacks/day).

      In short, yah I know. Buying feels easier. However, you actually spend a lot on the ore. Just make sure JCs not the only thing you do

  6. I know mining/herbing is boring.
    But after all my daily cooldowns, posting items left in the mailbox, run my toons through the tillers plots, I don't mind farming ore/herbs for 20-40mins a day.

    I look at it this way, if I willing to pay 3g and under for each ghost iron ore, every time I farm a node, I make like 15g and how long really does it take to find a node in Jade forest, 3 mins at most, more like 1 min. an hour , you can make 500g , or save 500g in ore purchases. Every hour.

    Seems like a good deal to me.

  7. You should do the calculation of GPH from gathering and GPH from processing separately. If you mix the two by gathering then processing, you are always less efficient than picking the best one and just doing that. If the GPH from gathering is better, then farm the mats, stick them on the AH and get back out there.

    The two important factors are the value you add by processing the mats; and the time it takes to process compared to the time it takes to gather.

    Lets say C is the value of the mats gathered in a period of time Tg. GPH of gathering is C/Tg.

    The value of the mats after processing is C times Y. The time it takes to process this amount of mats is Tg/X. The GPH of processing is Value-cost/Time = (CY - C)/(Tg/X) = (C/Tg)((Y-1)X)

    If we equate the two GPH values to find the break-even then the (C/Tg) on both sides cancels out to give (Y-1)X=1. A bit of manipulation eventually yields:
    What this means is that the profit you need to make in order for processing to be better than gathering is inversely related to the time gathering takes over processing. Confused? :)

    An example: If you can process an hours worth of gathered mats in 20 minutes, then X=3 (60/20). So our processing profit multiplier is 1+1/3 = 1.333. If you can sell the finished goods for more than a 33% profit, then you should buy the mats. If you can't, you are better off out there farming.

    If you can do it in 12 minutes, then X=5 (60/12). Processing multiplier is 1+1/5=1, so a 20% profit will make you better off sitting in Org.

    Processing in this context means - searching on the AH, buying it, getting it from the mailbox, converting it with professions.
    It makes sense really - the more efficient you are converting mats into goods, the less you need to make on each conversion. Obviously, if you love farming you might be willing to accept less GPH to do it.

    1. "If the GPH from gathering is better, then farm the mats, stick them on the AH and get back out there." A man after my own heart! I tend to do this honestly and just go on binges whenever something is leaning one way or another but in general, my advice for most people, and what I recommend over and over on this blog is to diversify; if you sell a lot of profitable things every day, you have faster turnover in the auction house, whereas with mining binges you might have to wait a day or two or three for everything to sell and waste a lot in AH fees while everything sells.

      I have a slight problem with your "value of mats after processing," because the time is additive, and not dependent solely on those materials. If I understand that you're including the value of the materials as a monetary gain rather than the more basic accounting view that I took in the post (bravo!), you'd need to include the multiplier for processing there, Something like "The value of mats after processing is CX+Y, where Z=average revenue per ore/prospect/stack/etc after cutting and posting gems. I played around with it but just could not get things to look all. Also, I followed you all the way through but have no idea where you got (Y-1)X. Don't understand why you would subtract a multiplier. Not disagreeing, but mind explaining that one to me?

      The logic makes sense though, intuitively, and I really really appreciate all the work you put in. Hopefully, some people read your comment and get a better understanding of the ebb and flow of the mining/processing argument. Also, thanks for showing that with an analytic approach, "it depends."

      All the best,

      P.S. Read through some of your blog, I've always been intrigued by Poker and betting ever since I learned about the Martingale system for roulette. If only it wasn't zero-sum!

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  9. The idea for your post was really good, it's one of those things that you take for granted because everyone says it's true - but when you start looking into it it's not as cut-and-dried as you'd expect.

    I'll try to explain the X,Y variables a bit better. I started with "what is market value of the mats that I can farm in a time period Tg?", and I called that C. In order to be able to look at the processing value in an equivalent way, I figured you had to be buying that same amount of mats from the AH - the cost of which is the market value (in the long run), so I was able to use C for that figure too.

    In terms of the value multiplier (Y), if you buy ore for 100g and you prospect/cut etc and sell everything for 300g - is it not true that 200g of ore will convert into 600g of gems? (Assuming of course you don't flood the market enough to screw up conditions.) The extra time taken doesn't really come into it because I am talking about gold per hour, rather than pure profit. If you buy 3 times the mats, it takes 3 times longer to process and you get 3 times the sales (hopefully) - so it all balances out in the end.

    So the calculations: Cost of mats = C. Total sales value after processing is CY. This means that the profit is CY-C = C(Y-1).

    Time taken to process is going to be some fraction of the time taken to farm the mats. So processing time is gathering time divided by X ... Tg/X.

    Profit per time is then C(Y-1) / (Tg/X). That fraction under the line is a bit screwy - if you want to bring it above you need to flip it upside down to give C(Y-1) * (X/Tg). Shuffle the order of the operands, and you get (C/Tg) * X(Y-1). Hope it makes more sense where I got that from now.

    I've been thinking about it since, and I think a logical way of looking at it is that an hours worth of gathering earns you the amount of C gold by selling the mats on the AH. In the processing scenario - if C gold is your starting capital, then at the end of an hours work, you'd better be able to sell that stuff for at least 2 times C, so that you still made at least C gold in that hour. If you are not able to double your money, then you need to reduce the time taken e.g. If you can make a 50% profit in 30 mins, then do the process twice and you'll still end up with the same gold in your hand at the end of the hour. Anything that makes you more gold or takes less time will make buying mats more attractive than farming.

    I really need to analyze my own sales in this light - I have no idea how much each of my professions are making relative to the time it takes to keep them going. I'm sure TSM Accounting should be helpful for that, but I need to figure out how to use it first :(


    p.s. Haven't looked at that blog in ages - was part of my poker phase :D

  10. Hi Reckles - me again :)

    I started going through my profession spreadsheets with a new outlook thanks to your blog, and I've decided I'm going to use a new metric to rate my activities - seconds per product. I'm starting by setting a target gold/hour. Based on your figures, mining can probably net 2800 gph - I'm going to pick 3000 gph just to have a nice round figure. The actual number doesn't matter anyway, it's just a figure to base relative numbers off.

    Next, I am looking at each of my products, and working out what the profit per product is. On my tailor, I often make netherweave bags and embersilk bags when I can snag the mats cheap - so lets go with those as examples.

    On my server, Embersilk bags currently cost about 300g to make, and sell for about 430g. This is a profit per bag of 130g. If I want this time to be worth 3000gph, then I need to make 23.07 bags per hour. This gives me 156 seconds to produce a bag - looks pretty good. If I spend less time than this buying the mats, crafting the bag and reposting before it sells, then I am getting more than 3000 gph for that time.

    Netherweave bags cost about 10g to make and sell for 22g. Profit per bag is 12g, so I would need to make 250 bags in an hour, giving me 14.4 seconds per bag - which is a bit more difficult to achieve. In fact I don't think it's possible considering the crafting time of the bag itself is 10 seconds, leaving 4.4s for buying the thread and cloth and making the bolts. I'd need cheaper mats or better selling conditions for it to be worthwhile (or I could allow for AFK crafting...)

    I am not suggesting that you should spend an hour churning out 250 bags, as that would affect the price and might take too long to shift. But it is good to be aware that certain activities have more margin built in.

    There isn't any new information here, but it is a way to relate crafting to gph without having to work out exactly how much time a craft/buy/post/repost takes. Really, all I'm doing is re-expressing desired profit as seconds allowed ... which makes perfect sense since "Time is Money, friend" :)


    1. It's funny that you say that, Ed. Mentally, I rank all my goldmaking activites against mining which yah pulls in between 2400 and 2800 g/hour depending on ore prices (although if you work your transmutes, jewelcrafting, and blacksmithing, it comes out to about 5,000g - check out my "make a million before 5.4" post). So, when I'm testing out whether Halls of Lightning is worth it or whether fishing up Emperor Salmon pools is worth it, then that's always my threshold. Mining is simple, easy, and has an almost zero-barrier to entry now that you can level in Pandaria and get Foragers Gloves in the Timeless Isle.

      Oh wait, you weren't saying to make 250 bags?! But I already bought the 2000 stacks of Netherweave cloth! C'mon, man, you gotta warn a guy sooner. :P


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